IRI Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 31st March

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• Morrisons to pay smaller suppliers quicker• Booths to start selling its products in Malaysia• Profits up at A.G. Barr in ‘volatile and uncertain’ market• HelloFresh launches meal kits in Sainsbury's • Booker sales growth eased in its fourth quarter, held back by weakening tobacco

sales.• Superdrug parent company posts 47% online sales increase• Consumer confidence levels unchanged in March• Lidl opens new distribution centre in West Midlands• Costcutter pilot store opens in Lincolnshire with food-to-go focus

Weekly News Summary – 27th March 2017

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Morrisons To Pay Smaller Suppliers QuickerMorrisons has pledged to shorten its payment terms for its smaller suppliers to a maximum of 14 days.

From 1 April, all goods for resale suppliers, whose business with the retailer is worth up to £100,000 annually, will be paid within 14 days of receipt of a valid electronic invoice. Morrisons said the move will benefit more than 3,000 suppliers.Morrisons is currently looking find more 200 local suppliers as part of its ‘Nation’s Local Foodmakers’ programme.Morrisons also announced today that to help small suppliers who currently don’t use an electronic invoicing system, it is developing a free-to-use supplier portal, through which invoices can be raised and submitted. The new service is expected to be introduced later this year.

Darren Blackhurst, Morrisons Group Commercial Director, said: “We aim to buy and sell simply and when we listened to our smaller suppliers, they told us that these payment terms would help them with their cash flow. We want our smallest suppliers to grow with us.”

The group added that suppliers who are already on payment terms that are less than 14 days, including livestock farmers, will remain on the same terms.

The moves build on the retailer’s recent drive to make itself easier and more transparent to work with. Changes introduced by Morrisons in recent months include reducing the type of supplier income from 37 to three; removing or reducing many charges that suppliers pay; resolving all cost price invoice queries within five working days; and introducing a simpler standard Supply Agreement for adoption this year.

Morrisons said it is also currently developing longer term business plans for own brand partners and strategic suppliers allowing for “more effective collaboration”.

Source: NamNews 27th March 2017

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Booths To Start Selling Its Products In Malaysia; Interested In Amazon MoveNorthern-based supermarket chain Booths is set to start selling its products in Malaysia via a tie-up with Hong Kong-based retail giant Dairy Farm International.

The family-owned retailer, which has yet to open a store in the South of England, told the Telegraph that it has agreed a deal which will see its best-selling products, including chutneys, jams and puddings, sold 19 Dairy Farm-owned shops across Malaysia.

In an interview with the newspaper, Booths’ Chairman Edwin Booth said: “They like that there are people called Booth who love what they sell. It’s the story, the heritage that gives people over their a great deal of reassurance, particularly when it comes to food. Our brand almost by default is very attractive over there.”

Meanwhile, Booth also revealed that he had been keenly watching Morrisons’ wholesale deal with Amazon Fresh. He said his chain could be interested in pursuing a similar deal, adding: “We’re keen to get Booths product into people’s homes.”

Source: NamNews 27th March 2017

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Profits Up At A.G. Barr In ‘Volatile And Uncertain’ MarketA.G. Barr has reported relatively upbeat year end results, helped by recent restructuring and moves to reduce the sugar content in its products.

In the year to 28 January 2017, the soft drink group’s pre-tax profit before exceptional items increased by 2.7% to £42.4m with underlying revenue up by 1.5% to £257.1m. Operating margin before exceptional items improved 50bps to 16.8%, boosted by cost controls.

Innovation helped lift performance of its core brands with IRN-BRU sales up 3.2% and Rubicon growing 4.9%.Chief Executive, Roger White, commented: “We have made considerable progress across the business over the last 12 months and delivered a solid financial performance in volatile and uncertain market conditions.”

He added: “As consumer tastes and preferences continue to change, our recent announcement that 90% of Company owned brands will contain less than 5g of total sugars per 100ml by the autumn of 2017 is a positive demonstration of how the business is responding to consumers’ needs with both pace and commitment.

“The UK consumer environment remains uncertain, however we are confident that our great brands, effective business model, clear strategy and strong team ensure we are well placed to realise the full potential of our business and to deliver consistent long-term shareholder value.”

Source: NamNews 28th March 2017

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HelloFresh launches meal kits in Sainsbury's Fast growing online meal kit provider, HelloFresh, has signed a distribution deal with the UK's second largest food retailer to sell its products through Sainsbury's stores.

Focus on two person meal kitsHelloFresh will now begin by making popular versions of its £10 meal kit for two available in 35 Sainsbury's stores in London and the South-East this week. It then plans to take the offer nationwide, though there is no target date to complete this. Initially, five recipe boxes will be sold through Sainsbury's, including from chicken jalfrezi with brown rice and a Mexican tomato jumble with spiced citrus halloumi. The selection will be rotated every six weeks to providing new inspiration for shoppers.

Reaching more shoppersThe launch comes as HelloFresh also experiments with a pop-up shop at London's Old Street Station - click here to see our store visit. It should help the multi-national online retailer reach new shoppers and crucially different customer missions. At present the business model centres on shoppers signing up for weekly deliveries of up to five meals. Distributing products through Sainsbury's will allow Hello Fresh to meet demand for shoppers looking for simple and imaginative meal solutions on a supermarket visit.

Building differentiation for Sainsbury'sFor Sainsbury's the tie-up builds on continuing work to take a more mission-based approach to store remodelling and will add to its focus on fresh food. HelloFresh's emphasis on fresh ingredients and scratch cooking also sits well with Sainsbury's continuing to drive to strengthen its reputation in this area, including the current Food Dancing campaign. It adds a new element to Sainsbury's food for tonight zones in remodelled stores as it make stores easier and quicker to shop for shoppers. The tie-up also shares similarities with Sainsbury's deal to stock healthy snack packs from online specialist Graze in its stores.

Interest continues in meal boxes from across the retail sectorSainsbury's is not alone in looking to tap into the meal kit market. In November Tesco trialled a 12 strong range of meal kits in 12 of its stores and has since followed up with its Food Love Stories concept that groups items needed to create a recipe in store. Waitrose also experimented with Dinner for Tonight meal kits but dropped them earlier this month to concentrate on offering freshly prepared meal solutions at its service counters.

Source: IGD 28th March 2017

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Booker updates on Q4 and full year performance Leading UK food and grocery wholesaler, Booker has announced its trading headlines for the 12 weeks to 24 March, with total sales up just 0.5%, slower than Q3 when growth was +2.9%.  However, the key drag on performance was a significant steepening decline in tobacco sales, where the onset of new plain-packaging and pack size regulations, saw the category sink by -7.9%.  In contrast growth in non-tobacco categories remained robust up 4.5%, providing a critical boost to this more profitable element of the wider mix.

Full year sales at £5.3bnBenefiting from the acquisition uplift of Londis and Budgens over the first half of the year, total Booker Group sales rose by 6.7% in 2016/17, while like-for-likes were more restrained.  Over the full 52-weeks like-for-like sales in non-tobacco categories were up 2.8%, while tobacco fell by 4.6%.  Primarily driven by this decline in tobacco, likes-for-like sales to retail customers dropped by 0.6%, while the tobacco-unaffected sales to caterers were up by 4.4%.  Catering sales continue to benefit both from the improved offer Booker has created for independent operators, but also from the successful acquisition of a growing portfolio of bigger national account and contract customers such as Carluccio's, Wagamama and Aramark.

Charles Wilson, Chief Executive, Booker Group commented:"Overall 2016/17 was a good year ... Booker Group remains on track ... On 27 January we announced the planned merger with Tesco.  We are excited about the benefits the enlarged Group will bring to consumers, our customers, suppliers, colleagues and shareholders.  The merger is going through the competition process.  Meanwhile it is business as usual as we continue to improve choice, prices and service for our retail, catering and small business customers."

Source: IGD 30th March 2017

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Poundland introduces new price points As the new £1 coin is introduced, discount retailer Poundland has unveiled its new pricing strategy, however focus will remain on the core price point.

New price points: 50p, £2 and £5Poundland has introduced three new price points - 50p, £2 and £5 - taking it from a single-price retailer to a multi-price retailer following trials of conditional spend in-store. Following customer research however, the Poundland offer will remain simple and only these three price points as well as the core £1 price will be used to dictate the discounter's pricing strategy. This new move takes Poundland more in line with its European fascia Dealz which is currently present in Ireland and Spain, and sells products at a variety of price points with €1.50 being the most common price.

Pep&Co shop-in-shopsAs well as having new price points across Poundland's offer, the introduction of Pep&Co clothing shop-in-shops and edited ranges in smaller stores will see Poundland offer an even larger multi-price offer. 90% of the Pep&Co offer is under £10 so the clothing offer remains a value one in line with Poundland's proposition. By the end of the year there will be just over 100 Pep&Co shop-in-shops in larger Poundland stores, while a smaller range will be introduced this April in 577 UK Poundland stores. There is scope in future for Pep&Co clothing to be introduced in Ireland's Dealz stores also, however focus remains rolling out in the UK and establishing the brand.

Focus remains on £1While there are significant changes and enhancements being made within the Poundland business, trading director Barry Williams has stressed that the business is committed to the pound. While inflation could cause the business difficulties, Williams is confident in the new team's focus on re-engineering the business and the cost-savings that can be made to ensure the pound stays king. As the UK gives the pound a new look, Poundland is reflecting this focus on its core price point by using it as a tool to market its continued value.

Source: IGD 30th March 2017

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Superdrug parent company posts 47% online sales increaseThe parent company of Superdrug and The Perfume Shop has delivered an overall 47 per cent increase in online health and beauty sales in 2016, thanks to a major investment in its ecommerce platform.

In Europe, AS Watson recorded a 42 per cent sales increase in 2016 with cosmetics up 63 per cent and all categories of fragrance, toiletries, skincare and health performing well, too.

Black Friday was a highlight, when sales up shot up by over 103 per cent with four orders processed every five seconds across all of AS Watson’s retail brands in Europe.

Meanwhile in the UK alone, Superdrug posted a whopping 60 per cent increase in online sales.

The results come after AS Watson announced plans to accelerate its digital strategy in 2014 with an initial investment of $60 million (£48 million).

Since then the company has worked to improve mobile customer experience, roll out mobile apps, integrate social media, enhance content, and expand click and collect services.

In 2016, over two million smartphone app downloads were recorded while 15 ecommerce channels were launched in the past two years in Asia. This all contributed to transaction growth at over 72 per cent in 2016.

The digital changes at AS Watson now compliments its brick-and-mortar business model which spans over 13,300 stores in 25 markets.

"What's encouraging for us is that we are not only seeing high online sales growth but also seeing increased footfall in our stores combined with a high annual spend from our loyalty card customers who shop with us both offline and online,” AS Watson chief operation officer Malina Ngai said.

“In the UK, for example, our Superdrug business achieved a high single digit like-for-like sales growth of 7.2 per cent for the five weeks ended 2 January 2017 while growing its online business by 47 per cent in the same period."

Source: Retail Gazette 30th March 2017

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Consumer Confidence Levels Unchanged In MarchGfK’s Consumer Confidence Index remained unchanged at -6 in March, with consumers remaining concerned about their personal finances and the general economic outlook for the UK.

The forecast for personal finances over the next 12 months remained stable +3, although this is still six points lower than March 2016. Meanwhile, with talks to exit the EU set to begin, consumers expectations for the general economic situation over the next 12 months stayed at -20 in March, eight points lower than March 2016.

However, there was some good news for retailers as the major purchase index rose by one point to +6, although this is still five points lower than this time last year.

Joe Staton, Head of Market Dynamics at GfK, commented: “No real upsets this month as the Barometer continues to bump along in negative territory. Consumers remain cagey about the state of their personal finances and the general economic picture for the UK, especially as wage growth fails to keep pace with the rising costs of living. Since the Brexit referendum, household spending has been a big driver of growth, so any slump will dent future economic prospects. However, if we carry on shopping, as seen by the uptick in the Major Purchase Index, then forecasts for a post-Trigger/pre-Brexit slowdown could be proved wrong.”

Source: NamNews 31st March 2017

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Lidl opens new distribution centre in West MidlandsLidl has just opened its 11th regional distribution centre (RDC) in the West Midlands, providing 400 jobs for the local area.Taking up 435,938sq ft, or 10 football pitches, the Wednesbury warehouse is also Lidl UK’s biggest.

It’s the German discount grocer’s second distribution centre to open since the Southampton one six months ago, and forms part of its three-year £1.5 billion expansion investment in the UK.

Lidl opened its first British-based distribution centre in 1994 nearby Lutterworth, and currently has warehouses in 10 other locations up and down the country.

The supermarket retailer’s recently-announced plans to relocate and expand its Scottish distribution centre to Eurocentral near Glasgow, creating over 350 jobs, has also been given the green light for construction, while further warehouses in Exeter, Doncaster and Bolton are also in the pipeline. 

The new Wednesbury distribution centre will serve 56 stores, with an additional eight stores eight stores planned in the next two years.

“The opening of our new Lidl Wednesbury warehouse marks an incredibly exciting time for the business, particularly in and around the West Midlands,” Lidl UK regional director Richard Shaw said.

“Not only is it necessary to accommodate the scale of our existing and future operations in the area, we have been able to create significant job opportunities as a result of the new warehouse and will continue to invest in the West Midlands and beyond, as we move forward with our expansion plans.

“We are incredibly proud of the teams here at Lidl that have been working in the background to get the new warehouse off the ground, and would like to extend our thanks to all those involved for their hard work and dedication.”

Source: Retail Gazette 31st March 2017

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Costcutter pilot store opens in Lincolnshire with food-to-go focusCostcutter Supermarkets Group has opened a third pilot store in Lincolnshire as part of its Shopper First programme.Shopper First combines Costcutter’s new brand and store design with shopper insights and range research and has been described as “the most important development in Costcutter’s 30-year history”.

Located in the Lincolnshire village of Kirton, the 1,900sq ft store underwent a £150,000 transformation, including a new focus on food-to-go, with a dedicated area featuring a Tchibo coffee machine; Rollover hotdogs; Slush Puppies; Country Choice hot foods, sweets and savouries and a range of meal deals.

Store owners Manjula and Suenita Keshwara have also partnered with local food producers to source their meat, fresh produce, bread and flowers.

Suenita Keshwara said: “The store is positioned within a village on a busy main road so introducing a strong food-to-go offer will enable us to better appeal to the needs of the passing customers and create another opportunity to grow sales.“The store has been designed to meet the needs of the local community and to offer not just the products they want, but a fantastic shopping experience.”

Costcutter’s first Shopper First pilot store opened in the South Yorkshire village of Darfield in January, followed by its second pilot store in Leeds which opened in February.

Source: Talking Retail 31st March 2017

IRI Weekly News updateYour window on the latest trends in Packaged Groceries

Stephen Hall

Friday 31st March